Mobile phone rates to get cheaper

Published by Nathalie Bonney on 15 March 2011. Last updated on 15 March 2011

Mobile phone users will soon see their bills go down thanks to an Ofcom ruling today, however, rates will not drop as quickly as it was originally hoped.

The industry regulator has announced a reduction in calls made to other networks.

Currently, it costs as much as 4p a minute for every call made to other networks but under Ofcom's ruling, the four national mobile network providers – 3UK, O2, Everything Everywhere (Orange and T-Mobile) and Vodafone – will have to reduce their charges from 4.3p to 2.66p on 1 April 2011.

Rates will then drop again to 0.69p by 2014. Ofcom says this cap will result in an 80% reduction in termination rates in the next four years.

"Today's ruling will affect anyone that dials up a mobile phone number, be it from a mobile or landline," says Ernest Doku, technology expert at uSwitch.

Changes will take time

The European Commission has already recommended that these rates are reduced to 0.69p by 2012; however, Ofcom's decision to phase in the decision means it will take an extra two years to reach this target.

"It is still disappointing that Ofcom has not taken on board the European Commission's recommendation to reduce these rates in half the time, reaching 0.69p by the end of 2012 instead of 2014," says Doku.

Nevertheless, he still calls the ruling a "clear victory against the bully boys," adding:

"Consumers have been unwittingly lining the pockets of the mobile phone 'cartel' with billions of pounds. Network rates are going to be virtually halved almost immediately, making it in theory much cheaper to call a mobile."

BT is already due to include calls to mobiles in its new 'all you can eat tariff' and it now remains to be seen if others will follow suit.

Mobile providers could look to introduce other charges to make up for the loss from reduced termination rates. Doku warns: "New charges for paper billing are just one way for the networks to cushion themselves from the blow."

Critics also argue that because the charges only apply to voice calls, consumers are still facing heavy fees for their data use.

Jonathan Leggett, mobile analyst at top10.com meanwhile says: "The next battleground is punitive data charges, which are unaffected by this decision. With smartphone ownership becoming the norm, bill shocks from people exceeding their usage aren’t going away any time soon."

Data rather than voice calls now makes up the majority of traffic over mobile networks, according to Ofcom.